The crypto world is an exciting one, but it’s fraught with danger. Scams, hacks, sudden market crashes, and more unexpected bad actors can find even the most vigilant investor vulnerable. In light of these hurdles, crypto exchanges are attempting various approaches to better secure their users. MEXC, a leading global cryptocurrency trading platform, has announced the deployment of the “$100M Shield.” By establishing this Guardian Fund, the company plans to improve user safety and establish greater trust throughout its platform. Although the specifics may vary, the idea points to an increasing recognition that robust security measures are imperative in the crypto sphere. This article explores how well these funds are actually working. It analyzes them in the context of existing insurance models and discusses the implications of how they should be managed.

Understanding MEXC's Approach to Security

Fortunately, MEXC has already made strides to ensure user protection. As of January 23, 2025, MEXC has shared over $414 million through its Insurance Fund Account. This fund goes to cover losses when users incur a greater loss in liquidation than what they have in their liquidatable margin. This Insurance Fund Account serves as a backstop, reimbursing users when liquidation is necessary in times of drastic market instability. Alongside the Insurance Fund Account, MEXC focuses on transparency and a multi-layered security infrastructure.

Key Features of MEXC's Security Measures:

  • Transparency: MEXC aims for complete transparency, with publicly displayed wallet addresses that allow users to verify balances and monitor transactions on the blockchain.
  • Multi-Layered Security: MEXC implements security features, including two-factor authentication, Proof of Reserves, and the Insurance Fund Account.
  • Proactive Risk Management: MEXC's Guardian Fund is designed to enhance user safety and trust across its platform, providing protection against extreme market volatility.

User security and trust are at the core of MEXC’s mission. It knows that it is imperative to safeguard user transactions, data and assets in the booming industry of cryptocurrency exchanges. The approach puts user safety first, finding new ways to keep people safe. Its Guardian Fund and Insurance Fund Account go a long way in addressing the risks that come with cryptocurrency trading.

Comparing Crypto Funds to Traditional Insurance

One key point is that MEXC’s Insurance Fund Account—and projects like it—aren’t easily compared to or adapted for traditional insurance. Making comparisons is the best way to understand what each is good at—and what they’re not. As such, MEXC’s Insurance Fund Account is a self-insurance model. Unlike many, the exchange dips into its own coffers to protect users from loss. Traditional insurance includes a third-party insurer that offers coverage in return for regular premium payments.

MEXC's Model vs. Traditional Insurance:

  • Funding Source: MEXC's fund is directly funded by the exchange, whereas traditional insurance relies on premiums paid by policyholders.
  • Third-Party Involvement: Traditional insurance involves a separate insurance company, while MEXC's fund is managed internally.
  • Coverage Scope: MEXC's Insurance Fund Account is specifically designed to protect users from losses due to liquidation. Traditional insurance policies can cover a broader range of risks, depending on the terms.

With the independent oversight and regulatory compliance that comes with being traditional insurance providers, user confidence can be boosted. It does so while adding burdens and expenses related to the role of third parties. MEXC's in-house approach allows for quicker response times and more direct control over the fund's management.

In-House vs. Third-Party Oversight: Trust and Security

Whether to employ an in-house crypto insurance fund, or outsource management, impacts user trust and overall security. This decision has big consequences that will affect how users come to understand the fund’s trustworthiness. Clearly, both approaches have their advantages and disadvantages.

In-House Management:

  • Clear Segregation of Funds: In-house management allows for clear segregation of user funds from the company's own revenue, reducing the risk of commingling funds and increasing user trust.
  • Enhanced Security Measures: The organization can implement robust security measures, such as strict access controls, multi-factor authentication, and continuous monitoring of user behavior, to protect user funds.
  • Compliance with Regulations: In-house management enables the organization to ensure compliance with regulatory requirements, such as maintaining a trust account that is insured up to $250,000 per beneficiary.
  • Transparency and Accountability: In-house management provides an added layer of transparency and accountability, as the organization is directly responsible for managing user funds and can provide regular updates and audits.
  • Reduced Risk of Third-Party Breaches: By managing user funds in-house, the organization reduces the risk of third-party breaches, which can compromise user trust and security.

In-house management provides you with increased control and typically results in quicker response times. It also places a heavy responsibility on the exchange itself to maintain the strictest standards of security and transparency. Frequent independent audits and freely available, easily understood, detailed information to the public about the fund’s operation are necessary components to instill user confidence.

Third-Party Oversight:

  • Independent Audits: Third-party oversight can provide independent audits and verification of the fund's assets and operations, enhancing transparency and trust.
  • Regulatory Compliance: Third-party providers are often subject to strict regulatory requirements, ensuring compliance with industry standards.
  • Expertise and Experience: Third-party providers may have specialized expertise and experience in risk management and insurance, which can improve the effectiveness of the fund.

Third-party oversight adds more process and expense. More important than any solution is the need to thoroughly vet any third-party provider to get the most reliable, competent provider. Effective risk measurement, monitoring, and control practices are necessary for managing third-party arrangements, which can impact the effectiveness of crypto insurance funds. Third-party suppliers of digital asset services should be subject to all applicable laws and regulations. For example, this compliance has implications for how crypto insurance money will be tracked. FICUs should be able to audit for compliance. This extends to allowing access to member accounts for verification and oversight, which will strengthen the efficacy of crypto insurance funds.

Additional Security Measures for Users

No matter if an exchange provides an insurance fund or not, users should be proactive to protect their own assets first. Here are some essential security measures:

  • Wallet-level policy controls: Some solutions implement policy enforcement directly on wallets, such as restricting individual transfers to a set limit.
  • Backup Files: Regularly back up your wallet and store the backups in multiple secure locations.
  • Phishing prevention: Be cautious of malicious actors sending emails that lure crypto owners into divulging sensitive information or downloading malware.

This is how the crypto community can start improving safety for everyone—in unifying exchange-level security safeguards with independent user precautions. Collectively, these actions create a trust-enhancing environment.

MEXC’s $100M Guardian Fund is a bold new initiative, aimed at protecting users and their assets. This represents an important step forward in addressing the dangers of the cryptocurrency market. These funds cannot fully supplant conventional insurance. While not required by any means, they do offer an additional layer of security and it demonstrates a vested interest in user safety and security. The greatest recipe for success will be transparency, strong security infrastructure, and a focus on the user experience. As we all know, the crypto industry is moving by leaps and bounds. Look for other cutting-edge solutions that address security and trust concerns coming soon.